New Delhi: Excess crude oil inventories in the US are finally and clearly in retreat as Opec's output agreement nears the end of its fourth month. But those oil bulls looking for higher prices shouldn't get too excited just yet - the surplus may just be moving elsewhere. True, the crude stockpile fell in each of the first three weeks of April, and the 3.64 million-barrel decline in the last of those was the biggest weekly drop of the year, according to the Energy Information Administration.

Over the period, inventories were drawn down at an average rate of 3,26,000 barrels a day, and a further 63,000 barrels a day have been drawn from the Strategic Petroleum Reserve (SPR) as part of a programme of sales put in place last year. This is far from spectacular, but it does buck the seasonal trend. US crude oil inventories typically rise during the first four months of the year, so the draw this year has begun about a month earlier than usual.

US refineries are helping to drain the glut. The amount they processed has soared as plants have come back into operation after normal seasonal maintenance. Volumes have climbed to 17.285 million barrels a day, the highest in data that goes back 35 years. Rates could climb even further in the weeks ahead - expansions at several plants across the country have boosted capacity to 18.62 million barrels a day, up by around 3,00,000 barrels over the same time last year. This ought to be good news for the bulls, but we need to look deeper. If the products being produced are not consumed, the glut is being transferred from crude to refined products.

Stockpiles of most refined products usually fall in the early part of the year. But middle distillates - which include heating oil, diesel and jet fuel - have been the only major refined product group where inventories were falling abnormally fast. They started falling in early February and were down 13% by mid-April.

In the most recent week's data, the volume of gasoline and middle distillates in storage rose, more than offsetting the draw down in crude stockpiles.

Gasoline stores have been increasing for the last two weeks, bucking seasonal trends. Excluding the SPR, total US oil inventories, including crude and refined products, rose by more than 6.6 million barrels in last week's data - their biggest increase since early February. Hardly evidence of a rebalancing. In order to really clear the glut, crude must first be processed into products and then those products need to be consumed.

But the early surge in U.S. oil use seems to be waning. Although four-week-average gasoline deliveries -- a proxy for demand -- soared in February and March, they have plateaued at around 9.3 million barrels a day since late March, down around 100,000 barrels a day year on year. It's a natural consequence of the 21 percent average increase in retail gas prices so far this year compared with the same period in 2016. Middle distillate demand has also slipped back from its pickup earlier this year.